SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No. 2-90939C
AMERIHOST PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 298-4500
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
As of August 12, 1997, 6,301,397 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 4
Consolidated Statements of Operation for the Three and Six
Months Ended June 30, 1997 and 1996 6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and 1996 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 11
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three and
Six Months Ended June 30, 1997 and 1996 18
PART II: Other Information
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 19
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,798,505 $ 3,029,039
Accounts receivable (including $830,051
and $3,119,905 from related parties) 3,068,635 5,083,973
Notes receivable (including $890,541
and $1,354,461 from related parties) 1,000,616 1,507,276
Prepaid expenses and other current assets 378,818 223,136
Refundable income taxes 811,673 30,629
Costs and estimated earnings in excess of
billings on uncompleted contracts
(including $2,091,374 and $2,048,259
from related parties) 2,257,381 2,083,259
Total current assets 10,315,628 11,957,312
Investments 1,197,639 1,595,858
Property and equipment:
Land 8,872,957 7,334,562
Buildings 37,002,499 27,885,463
Furniture, fixtures and equipment 12,171,764 10,984,572
Construction in progress 8,626,298 4,709,064
Leasehold improvements 1,156,733 2,404,060
67,830,251 53,317,721
Less accumulated depreciation and
mortization 7,673,130 7,481,889
60,157,121 45,835,832
Long-term notes receivable (including
$4,398,656 and $1,120,888 from
related parties) 5,728,420 3,831,504
Costs of management contracts acquired,
net of accumulated amortization of
$1,300,904 and $1,158,379 995,388 907,404
Other assets (including deferred taxes
of $221,000 and $171,000), net of
accumulated amortization of $2,408,060
and $2,082,450 3,024,226 2,773,246
9,748,034 7,512,154
$ 81,418,422 $ 66,901,156
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,518,120 $ 5,293,184
Bank line-of-credit 6,118,567 1,707,424
Accrued payroll and related expenses 1,030,697 935,120
Accrued real estate and other taxes 870,649 685,796
Other accrued expenses and current liabilities 927,355 828,596
Current portion of long-term debt 1,213,625 1,554,200
Total current liabilities 14,679,013 11,004,320
Long-term debt, net of current portion 42,452,735 32,785,108
Deferred income 709,534 630,899
Commitments
Minority interests 1,515,743 1,569,200
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 25,000,000 shares;
issued 6,301,397 shares at June 30, 1997, and
6,036,921 shares at December 31, 1996 31,507 30,185
Additional paid-in capital 18,552,414 17,170,154
Retained earnings 4,870,643 5,104,457
23,454,564 22,304,796
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
22,061,397 20,911,629
$ 81,418,422 $ 66,901,156
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 3,377,893 $ 2,187,659 $ 5,774,459 $ 3,493,797
Other hotels 4,900,725 5,765,426 8,932,759 10,042,784
Development and construction 2,309,358 8,211,296 8,443,100 12,191,098
Management services 767,736 694,148 1,372,379 1,183,830
Employee leasing 3,233,526 2,959,210 6,135,831 5,550,799
14,589,238 19,817,739 30,658,528 32,462,308
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 2,107,253 1,176,762 3,969,807 2,062,528
Other hotels 3,366,595 3,816,470 7,049,452 7,669,555
Development and construction 2,288,743 7,197,907 7,464,213 10,311,585
Management services 517,613 496,384 930,003 869,035
Employee leasing 3,145,727 2,875,830 5,977,338 5,401,739
11,425,931 15,563,353 25,390,813 26,314,442
3,163,307 4,254,386 5,267,715 6,147,866
Depreciation and amortization 1,085,631 856,357 2,241,924 1,659,172
Leasehold rents - hotels 529,958 518,172 1,064,590 964,302
Corporate general and administrative 487,049 521,994 1,069,199 1,006,646
Operating income 1,060,669 2,357,863 892,002 2,517,746
Other income (expense):
Interest expense (877,385) (619,124) (1,687,392) (1,284,298)
Interest income 205,251 161,276 340,700 315,635
Other income (expense) 32,274 15,077 36,084 56,986
Gain on sale of property - 404,256 1,744,599 404,256
Contractual termination expenses - - (1,697,448) -
Equity in net income and losses
of affiliates 31,688 181,028 (209,413) 36,389
Income (loss) before minority
interests and income taxes 452,497 2,500,376 (580,868) 2,046,714
Minority interests in (income) loss
of consolidated subsidiaries
and partnerships (59,659) (161,794) 99,054 42,207
Income (loss) before income tax 392,838 2,338,582 (481,814) 2,088,921
Income tax expense (benefit) 161,000 959,000 (248,000) 857,000
Net income (loss) $ 231,838 $ 1,379,582 $ (233,814) $ 1,231,921
Earnings (loss) per share $ 0.03 $ 0.20 $ (0.05)$ 0.18
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 32,767,188 $ 28,223,649
Cash paid to suppliers and employees (28,567,741) (22,704,610)
Interest received 283,601 93,950
Interest paid (1,677,367) (1,246,185)
Income taxes paid (338,902) (318,979)
Net cash provided by operating activities 2,466,779 4,047,825
Cash flows from investing activities:
Distributions from affiliates 101,850 259,800
Purchase of property and equipment (17,282,611) (3,937,049)
Purchase of investments (100) (350,200)
Increase in notes receivable (3,319,251) (2,537,964)
Collections on notes receivable 1,698,233 1,633,652
Pre-opening and management contract costs (230,508) (292,968)
Proceeds from sales of property 3,390,576 524,377
Acquisition of leasehold interest - (94,000)
Contractual termination costs (1,551,650) -
Net cash used in investing activities (17,193,461) (4,794,352)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 11,223,467 3,339,047
Principal payments of long-term debt (1,837,020) (871,292)
Proceeds from exercise of common stock options 789,075 -
Proceeds from line-of-credit 9,011,144 5,045,931
Payments on line-of-credit (4,600,000) (5,631,164)
Decrease in minority interests (90,518) (26,518)
Increase in deferred offering costs - (74,456)
Proceeds from issuance of common stock - 202,969
Net cash provided from financing activities 14,496,148 1,984,517
Net increase (decrease) in cash (230,534) 1,237,990
Cash and cash equivalents, beginning of period 3,029,039 1,371,278
Cash and cash equivalents, end of period $ 2,798,505 $ 2,609,268
Reconciliation of net income (loss) to net cash
provided by operating activities:
Net income (loss) $ (233,814) $ 1,231,921
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,241,924 1,659,172
Equity in net loss (income) of affiliates and
amortization of deferred income 227,568 (19,931)
Minority interests in net income of subsidiaries (99,054) (42,207)
Amortization of deferred interest and loan discount 19,879 19,880
Increase in deferred income 166,260 63,542
Gain on sale of property (1,744,599) (404,256)
Increase in deferred tax asset (50,000) -
Contractual termination costs 1,697,448 -
Compensation paid through issuance of common stock and
common stock options 350,365 29,676
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 2,062,284 (17,470)
Increase in interest receivable (54,282) (218,869)
Increase in prepaid expenses and other
current assets (156,997) (72,611)
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts (174,122) (4,358,065)
Increase in other assets (612,856) (130,454)
(Increase) decrease in refundable income taxes (536,902) 230,530
(Decrease) increase in accounts payable (820,282) 5,275,213
Increase in accrued expenses and other
current liabilities 196,630 478,846
Increase in accrued income taxes - 307,491
(Decrease) increase in accrued interest (12,671) 15,417
Net cash provided by operating activities $ 2,466,779 $ 4,047,825
See notes to consolidated financial statements.
</TABLE>
1. BASIS OF PREPARATION:
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of recurring
adjustments necessary to present fairly the financial position of Amerihost
Properties, Inc. and subsidiaries as of June 30, 1997 and December 31, 1996
and the results of its operations for the three and six months ended June 30,
1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year. It
is suggested that the accompanying financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's 1996 Annual Report on Form 10-K. Certain reclassifications
have been made to the 1996 financial statements in order to conform with the
1997 presentation.
2. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME TAXES:
Deferred income taxes are provided on the differences in the bases of the
Company's assets and liabilities determined for tax and financial reporting
purposes.
The income tax expense (benefit) for the three and six months ended June 30,
1997 and 1996 was based on the Company's estimate of the effective tax rate
expected to be applicable for the full year. A $50,000 reduction in the
deferred tax asset reserve was made during the six months ended June 30,
1997. The Company expects the effective tax rate to approximate the Federal
and state statutory rates.
4. EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share of common stock is computed by dividing adjusted
net income (loss) by the weighted average number of shares of common stock
and dilutive common stock equivalents outstanding. The weighted average
number of shares used in the computations were 7,209,637 and 7,098,599 for
the three and six months ended June 30, 1997, and 6,764,415 and 6,695,726 for
the three and six months ended June 30, 1996, respectively.
5. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the six months ended June 30, 1997 and 1996:
<TABLE>
<CAPTION> Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Purchase of investments through issuance of
common stock and decrease in notes and accrued
interest receivable $ - $ 143,929
Accrued contractual termination costs $ 145,798 $ -
</TABLE>
6. HOTEL LEASES:
The Company, through its subsidiaries and consolidated partnerships, has
leasehold interests in five hotels ranging from 61.5% to 100%, the
operations of which are included in the Company's consolidated financial
statements. All of these leases provide for an option to purchase the
hotel. Some of the purchase prices are based upon a multiple of gross room
revenues for the preceding twelve months and the others are based upon a
fixed amount, typically with annual increases based upon the change in the
consumer price index. At June 30, 1997, the aggregate purchase price for
these five hotels was approximately $16,230,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the development of AmeriHost Inn hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost Inn
hotels and other mid-price hotels. As of June 30, 1997, there were 51 AmeriHost
Inn hotels open, of which 19 were wholly-owned, two were majority-owned, 28 were
minority-owned, and two were managed for unrelated third parties. A total of 25
AmeriHost Inn hotels were opened during the past twelve months, including two
hotels which were converted from another brand affiliation. The Company intends
to use the AmeriHost Inn brand when expanding its hotel operations segment. All
of the hotels currently under construction will be AmeriHost Inn hotels. As of
June 30, 1997, 15 AmeriHost Inn hotels were under construction, of which 11 will
be wholly-owned, three will be minority-owned, and one will be owned by an
unrelated third party. Same room revenues for all AmeriHost Inn hotels
increased approximately 5.6% in the second quarter of 1997 compared to the
second quarter of 1996, attributable to an increase of $2.83 in average daily
rate and a 0.04% increase in occupancy. These results relate to the 24
AmeriHost Inn hotels that were operating for at least thirteen full months at
June 30, 1997.
Revenues from hotel operations consist of the revenues from all hotels in which
the Company has a 100% or controlling ownership or leasehold interest
("Consolidated" hotels). Investments in other entities in which the Company has
a minority ownership interest are accounted for using the equity or cost method.
As a result of the Company's focus on increasing the number of Consolidated
hotels, the Company expects that revenues from the hotel operations segment will
increase over time as a percentage of the Company's overall revenues.
Development and construction revenues consist of one-time fees for new
construction, acquisition and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
revenue from management services provided to minority-owned hotels and unrelated
third parties. Employee leasing revenues consist of revenues the Company
receives for leasing its employees to minority-owned hotels and unrelated third
parties. All revenues attributable to development, construction, management and
employee leasing services with respect to Consolidated hotels have been
eliminated in consolidation.
The results for the second quarter and first six months of 1997 were consistent
with the Company's primary objective of increasing the number of wholly-owned,
Consolidated AmeriHost Inn hotels. Due to the Company's focus on developing and
constructing a significant number of Consolidated AmeriHost Inn hotels during
the second quarter and first six months of 1997, the Company recognized lower
revenues and profits from the development and construction of hotels for
minority-owned and unrelated third parties during these periods. In addition,
the Company disposed of several non-AmeriHost Inn hotels during the past twelve
months, as part of the Company's plan to invest all available resources into the
AmeriHost Inn hotel brand. Although this strategy has a short-term negative
impact on revenues and earnings, the Company believes that the long-term
benefits will be substantial.
Revenues from AmeriHost Inn hotels increased 54.4% to $3.4 million in the second
quarter of 1997, from revenues of $2.2 million in the second quarter of 1996,
due to the addition of 10 Consolidated AmeriHost Inn hotels during the past
twelve months and an increase in same room revenues. Revenues from the hotel
management and employee leasing segments increased by 9.5% in total during the
second quarter due primarily to the increase in same room revenues and the net
addition of nine minority-owned hotels. These increases were offset by a
decrease in non-AmeriHost Inn hotel revenues as a result of the disposition of
four hotels during the past twelve months and a decrease in hotel development
and construction revenue from joint ventures, resulting in a decrease in total
revenues of 26.4% to $14.6 million during the three months ended June 30, 1997,
from $19.8 million during the three months ended June 30, 1996. Revenues from
the first six months of 1997 followed a similar trend, with revenues from
AmeriHost Inn hotels increasing 65.3% to $5.8 million from $3.5 million during
the first six months of 1996, and revenues from hotel management and employee
leasing increasing by 11.5% in total during the first six months of 1997
compared to 1996. These increases were also offset by the decreases in non-
AmeriHost Inn hotel revenue as well as hotel development and construction
revenue, resulting in a decrease in total revenues of 5.6% to $30.7 million
during the six months ended June 30, 1997, from $32.5 million during the six
months ended June 30, 1996. Net income was also impacted by the disposition of
non-AmeriHost Inn hotels and the lower hotel development and construction
activity for minority-owned and unaffiliated entities. In addition, a
significant number of Consolidated AmeriHost Inn hotels opened during the last
twelve months. These hotels generally were operating in the first six months of
1997 during their initial stabilization period, when revenues are typically
lower. Net income for the second quarter decreased to $231,838, or $0.03 per
share in 1997, from $1.4 million, or $0.20 per share in 1996. Excluding the
gain on the sale of excess land in the amount of $180,076, net of minority
interest and income taxes, earnings per share was $0.18 for the second quarter
of 1996. Net loss was ($233,814), or ($0.05) per share, for the six months
ended June 30, 1997, compared to net income of $1.2 million, or $0.18 per share,
for the six months ended June 30, 1996. The Company sold two Consolidated
hotels during the first quarter of 1997, resulting in a total gain, net of
minority interests, of $1.7 million. These gains were offset by a non-recurring
charge of $1.7 million from the termination of a consulting agreement with Urban
2000 Corp. (a company owned by the Company's Chairman of the Board and a former
officer/director) and the departure of an officer/director. Excluding the gains
from property sales and the non-recurring charge, earnings (loss) per share was
($0.05) and $0.16 for the six months ended June 30, 1997 and 1996, respectively.
The Company uses EBITDA as a supplemental performance measure along with net
income to report its operating results. EBITDA is defined as net income,
adjusted to eliminate the impact of (i) interest expense; (ii) interest and
other income; (iii) leasehold rents for hotels, which the Company considers to
be financing costs similar to interest; (iv) income tax expense (benefit), (v)
depreciation and amortization; (vi) gains or losses from property transactions;
and (vii) non-recurring charges. EBITDA should not be considered as an
alternative to net income or cash flows from operating activities as a measure
of liquidity. EBITDA decreased 31.2% and 22.3% to $2.6 million and $4.1 million
during the three and six months ended June 30, 1997, respectively, from $3.9
million and $5.3 million during the three and six months ended June 30, 1996.
An EBITDA schedule is included herein.
The Company has retained an investment banking firm to review strategic
alternatives for the Company. During the second quarter of 1997, the Company
and its joint venture partners had postponed the development of additional
hotels which were expected to begin construction during the second quarter.
Instead, the Company focused on the development of several wholly-owned
AmeriHost Inn hotels. Consequently, the Company realized lower levels of
revenues and profits in the second quarter of 1997 from the development and
construction of hotels for minority-owned entities. The Company intends to
increase its hotel development activity for joint ventures during the second
half of 1997.
Amerihost had an ownership interest in 68 hotels at June 30, 1997 versus 53
hotels at June 30, 1996 (excluding hotels under construction). This increased
ownership was achieved primarily through the development of AmeriHost Inn hotels
for the Company's own account and for minority-owned entities. These figures
include a net increase of five Consolidated hotels, from 25 at June 30, 1996 to
30 at June 30, 1997.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
Revenues decreased 26.4% and 5.6% to $14.6 million and $30.7 million during the
three and six months ended June 30, 1997, respectively, from revenues of $19.8
million and $32.5 million during the three and six months ended June 30, 1996.
Increases in revenues from the Consolidated AmeriHost Inn hotels, the hotel
management segment and the employee leasing segment were more than offset by
decreases in the hotel development and construction segment and the non-
AmeriHost Inn hotel operations segment.
Hotel operations revenue increased 4.1% and 8.7% to $8.3 million and $14.7
million during the three and six months ended June 30, 1997, respectively, from
$8.0 million and $13.5 million during the three and six months ended June 30,
1996. This increase was attributable primarily to the net addition of five
Consolidated hotels to the hotel operations segment from July 1, 1996 through
June 30, 1997, and an increase in same room revenues. The Company opened seven
newly constructed Consolidated AmeriHost Inn hotels during this twelve month
period, and acquired additional ownership interests in three hotels causing them
to become Consolidated hotels. These ten additions were offset by the sale of
three non-AmeriHost Inn Consolidated hotels and the lease termination of two
non-AmeriHost Inn Consolidated hotels during this same period. The hotel
operations segment included the operations of 30 Consolidated hotels comprising
2,469 rooms at June 30, 1997, compared to 25 Consolidated hotels comprising
2,570 rooms at June 30, 1996. After considering the Company's ownership
interest in the majority-owned Consolidated hotels, this translates to 2,249 and
2,197 equivalent owned rooms as of June 30, 1997 and 1996, respectively, or an
increase of 2.4%.
Hotel development revenue decreased 71.9% and 30.7% to $2.3 million and $8.4
million during the three and six months ended June 30, 1997, respectively, from
$8.2 million and $12.2 million during the three and six months ended June 30,
1996. The decrease was due to the decrease in hotel development and
construction activity performed for unrelated entities or entities in which the
Company holds a minority ownership interest. The Company was constructing eight
and ten hotels for minority-owned entities or unrelated third parties during the
second quarter and first six months of 1997, respectively, including six hotels
which opened during the first six months of 1997, compared to fourteen and
sixteen hotels during the three and six months ended June 30, 1996. The Company
also had several additional projects in various stages of pre-construction
development during both six month periods.
Hotel management revenue increased 10.6% and 15.9% to $767,736 and $1.4 million
during the three and six months ended June 30, 1997, respectively, from $694,148
and $1.2 million during the three and six months ended June 30, 1996. The
number of hotels managed for third parties and minority-owned entities increased
from 39 hotels, representing 3,620 rooms, at June 30, 1996 to 48 hotels,
representing 3,963 rooms, at June 30, 1997. The addition of management
contracts for 16 newly constructed hotels (982 rooms) was partially offset by
the termination of three management contracts (366 rooms) with minority-owned
entities as a result of the sale of the hotel, the termination of three
management contracts (173 rooms) with minority-owned hotels which became
Consolidated hotels due to the Company acquiring additional ownership interests,
and the termination of one management contract with an unrelated third party.
Management fee revenues were also impacted in the first quarters of 1997 and
1996 by newly constructed hotels operating during their initial stabilization
period when revenues are typically lower. The management contracts terminated,
all of which were for hotels other than the AmeriHost Inn brand, were typically
for larger hotels compared to the 16 hotels added during the twelve months ended
June 30, 1997. The Company does not recognize management fee revenue from
Consolidated hotels.
Employee leasing revenue increased 9.3% and 10.5% to $3.2 million and $6.1
million during the three and six months ended June 30, 1997, respectively, from
$3.0 million and $5.6 million during the three and six months ended June 30,
1996, due primarily to the addition of hotels managed for minority-owned
entities as described above, and the associated increase in payroll costs which
is the basis for the employee leasing revenue.
Total operating costs and expenses decreased 26.6% and 3.5% to $11.4 million
(78.3% of total revenues) and $25.4 million (82.8% of total revenues) during the
three and six months ended June 30, 1997, respectively, from $15.6 million
(78.5% of total revenues) and $26.3 million (81.1% of total revenues) during the
three and six months ended June 30, 1996. Operating costs and expenses in the
hotel operations segment increased 9.6% and 13.2% to $5.5 million and $11.0
million during the three and six months ended June 30, 1997, respectively, from
$5.0 million and $9.7 million during the three and six months ended June 30,
1996. These increases resulted primarily from the net addition of five
Consolidated hotels to this segment and are directly related to the 4.1% and
8.7% increases in segment revenue during the three and six months ended June 30,
1997, respectively. Hotel operations segment operating costs and expenses as a
percentage of segment revenue increased to 66.1% and 74.9% during the three and
six months ended June 30, 1997, respectively, from 62.8% and 71.9% during the
three and six months ended June 30, 1996, due primarily to a greater number of
hotels in the first six months of 1997 operating during their initial
stabilization period, when revenues are typically lower.
Operating costs and expenses for the hotel development segment decreased 68.2%
and 27.6% to $2.3 million and $7.5 million during the three and six months ended
June 30, 1997, respectively, from $7.2 million and $10.3 million during the
three and six months ended June 30, 1996, consistent with the 71.9% and 30.7%
decrease in hotel development revenues for the three and six months ended June
30, 1997. Operating costs and expenses in the hotel development segment as a
percentage of segment revenue increased to 99.1% and 88.4% during the three and
six months ended June 30, 1997, respectively, from 87.7% and 84.6% during the
three and six months ended June 30, 1996. The second quarter and first six
months of 1997 consisted primarily of construction activity which has high
operating costs in relation to the revenue recognized. The second quarter and
first six months of 1996 also consisted of a significant level of construction
activity, however also included a greater level of development activity which
has lower operating costs in relation to the revenue recognized. In addition,
the periods in 1996 included contracts whereby the Company acted as construction
manager, recognizing operating costs which were significantly lower in relation
to the revenue recognized. Hotel management segment operating costs and
expenses increased 4.3% and 7.0% to $517,613 and $930,003 during the three and
six months ended June 30, 1997, respectively, from $496,384 and $869,035 during
the three and six months ended June 30, 1996. These increases are consistent
with the 10.6% and 15.9% increases in segment revenues for the three and six
months ended June 30, 1997, respectively, with the first six months of 1997
being partially offset by the termination in the first quarter of 1997 of
certain contractual payments which had been made to co-managers. Employee
leasing operating costs and expenses increased 9.4% and 10.7% to $3.1 million
and $6.0 million during the three and six months ended June 30, 1997,
respectively, from $2.9 million and $5.4 million during the three and six months
ended June 30, 1996, which are consistent with the 9.3% and 10.5% increases in
segment revenue for the three and six months ended June 30, 1997, respectively.
Depreciation and amortization expense increased 26.8% and 35.1% to $1.1 million
and $2.2 million during the three and six months ended June 30, 1997,
respectively, from $856,357 and $1.7 million during the three and six months
ended June 30, 1996. These increases were primarily attributable to the net
addition of five Consolidated hotels to the hotel operations segment and the
resulting depreciation and amortization therefrom.
Leasehold rents - hotels increased 2.3% and 10.4% to $529,958 and $1.1 million
during the three and six months ended June 30, 1997, respectively, from $518,172
and $964,302 during the three and six months ended June 30, 1996. The increases
during the second quarter and first six months of 1997 compared to the same
periods in 1996 were primarily due to the increase in percentage rents for
certain hotels which are based on the hotel's operating revenues, partially
offset by the sale of a leased Consolidated Hotel and the termination of the
lease for another Consolidated Hotel in the first quarter of 1997.
Corporate general and administrative expense decreased 6.7% to $487,049 during
the three months ended June 30, 1997, from $521,994 during the three months
ended June 30, 1996. Corporate general and administrative expense increased
6.2% to $1.1 million during the first six months of 1997, from $1.0 million
during the first six months of 1996. The fluctuations were primarily due to the
Company's overall growth, operational efficiencies and the allocation of costs
associated with hotel development activity.
The Company's operating income decreased 55.0% and 64.6% to $1.1 million and
$892,002 during the three and six months ended June 30, 1997, respectively, from
$2.4 million and $2.5 million during the three and six months ended June 30,
1996. The following discussion of operating income by segment is exclusive of
any corporate overhead cost allocation. Operating income from the AmeriHost Inn
hotels increased 4.8% to $785,140 during the three months ended June 30, 1997
from $748,997 during the three months ended June 30, 1996, resulting primarily
from the addition of Consolidated AmeriHost Inn hotels to the segment and an
increase in same room revenues. The increased impact of seasonality in the
first quarter of 1997 associated with a greater number of Consolidated AmeriHost
Inn hotels and the impact of the significant number of Consolidated AmeriHost
Inn hotels operating in the first six months of 1997 during their initial
stabilization period resulted in a 6.1% decrease in operating income from the
AmeriHost Inn hotels to $921,494 during the six months ended June 30, 1997 from
$981,351 during the six months ended June 30, 1996. Operating income from the
hotel development segment decreased 99.7% and 48.9% to $2,559 and $942,772
during the three and six months ended June 30, 1997, respectively, from $996,262
and $1.8 million during the three and six months ended June 30, 1996. The
decrease in hotel development operating income was due to the decrease in hotels
developed and constructed for third parties and minority-owned entities during
the second quarter of 1997, which more than offset the increase realized in the
first quarter of 1997. Operating income from the hotel management segment
increased 19.9% and 40.9% to $163,237 and $278,251 during the three and six
months ended June 30, 1997, respectively, from $136,163 and $197,542 during the
three and six months ended June 30, 1996. This increase was due primarily to
the net addition of nine hotel management contracts with minority-owned and
unaffiliated entities during the twelve month period ended June 30, 1997.
Employee leasing operating income increased 6.2% and 7.4% to $86,899 and
$156,693 during the three and six months ended June 30, 1997, respectively, from
$81,805 and $145,910 during the three and six months ended June 30, 1996, due to
the increase in employee leasing agreements with minority-owned entities.
Interest expense increased 41.7% and 31.4% to $877,385 and $1.7 million during
the three and six months ended June 30, 1997, respectively, from $619,124 and
$1.3 million during the three and six months ended June 30, 1996. This increase
was primarily attributable to the additional mortgage financing of newly
constructed Consolidated AmeriHost Inn hotels.
The Company's share of equity in income (loss) of affiliates decreased 82.5% to
$31,688 during the three months ended June 30, 1997, from $181,028 during the
three months ended June 30, 1996. Equity in income (loss) of affiliates
decreased to ($209,413) during the six months ended June 30, 1997 from $36,389
during the first six months of 1996. The decreases in equity of affiliates
during the three and six month periods were primarily due to the significant
number of newly constructed minority-owned hotels which were operating during
their initial stabilization period, when revenues are typically lower, the
increasing impact of seasonality as the number of minority-owned hotels
increases and the sale of a minority-owned hotel during the second quarter of
1996. Distributions from affiliates were $101,850 during the first six months
of 1997 compared to $259,800 during the first six months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has four main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects; (iii) fees from management contracts; and (iv) fees from
employee leasing services. Cash from hotel operations is typically received at
the time the guest checks out of the hotel. A portion of the Company's hotel
operations revenues is generated through other businesses and contracts and is
usually paid within 30 to 45 days from billing. Fees from development,
construction and renovation projects are typically received within 15 to 45 days
from billing. Due to the procedures in place for processing its construction
draws, the Company typically does not pay its contractors until the Company
receives its draw from the equity or lending source. Management fee revenues
typically are received by the Company within five working days from the end of
each month. Cash from the Company's employee leasing segment typically is
received 24 to 48 hours prior to the pay date.
During the first six months of 1997, the Company received cash from operations
of $2.5 million, compared to $4.0 million during the first six months of 1996,
or a decrease in cash received from operations of $1.6 million. The decrease in
cash flow from operations during the first six months of 1997, when compared to
1996, can be attributed to a significant decrease in hotel development and
construction activity for minority-owned entities. In addition, the decrease
can also be attributed to the increasing impact of seasonality and the
significant number of hotels operating during their initial stabilization period
as the number of Consolidated hotels increased from 25 hotels at June 30, 1996
to 30 hotels at June 30, 1997.
The Company invests cash in three principal areas: (i) the purchase of property
and equipment through the construction and renovation of Consolidated hotels;
(ii) the purchase of equity interests in hotels; and (iii) the making of loans
to affiliated and non-affiliated hotels for the purpose of construction,
renovation and working capital. During the first six months of 1997, the
Company used $17.2 million in investing activities compared to $4.8 million in
the first six months of 1996. During the first six months of 1997, the Company
used $17.3 million to purchase property and equipment for Consolidated AmeriHost
Inn hotels, used $1.6 million for the termination of certain contractual
agreements, used $1.6 million for loans, net of loan collections, and received
$3.4 million from the sale of hotels. During the first six months of 1996, the
Company used cash primarily for the purchase of $3.9 million in property and
equipment for Consolidated hotels, used $350,200 for the purchase of minority
equity interests in hotels, used $904,312 for loans, net of repayments from
minority-owned hotels, and received $524,377 from the sale of excess land. In
addition, the Company received distributions from investments in minority-owned
hotels of $101,850 during the first six months of 1997, compared to $259,800
during the first six months of 1996.
Cash received from financing activities was $14.5 million during the first six
months of 1997 compared to $2.0 million during the first six months of 1996. In
1997, the primary factors were proceeds of $9.4 million from the mortgage
financing of Consolidated hotels, net of principal repayments, net proceeds of
$789,075 from the exercise of common stock purchase options, and net proceeds of
$4.4 million from the Company's operating line-of-credit. In 1996, the
contributing factors were proceeds of $2.5 million from the mortgage financing
of Consolidated hotels, net of principal repayments, and net repayments of
$585,233 on the Company's operating line-of-credit.
At June 30, 1997, the Company had $6.1 million outstanding under its operating
line-of-credit. The Company's line-of-credit was renewed and increased to $10.0
million effective May 1, 1997. The operating line-of-credit (i) is
collateralized by a security interest in certain of the Company's assets,
including its interest in various joint ventures; (ii) bears interest at an
annual rate equal to the lending bank's base rate plus 1/2% (with a minimum
interest rate of 7.5%); and (iii) matures May 1, 1998. At June 30, 1997, the
Company also had outstanding $2.25 million of its 7% Subordinated Notes which
are unsecured obligations due October 9, 1999 and which pay interest quarterly.
Pursuant to the terms of the 7% Subordinated Notes, no dividends may be paid on
any capital stock of the Company until the 7% Subordinated Notes have been paid
in full. At the Company's sole discretion, the 7% Subordinated Notes may be
prepaid at any time without prepayment penalty.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1997.
SEASONALITY
The lodging industry, in general, is seasonal by nature. The Company's hotel
revenues are generally greater in the second and third calendar quarters than in
the first and fourth quarters due to weather conditions in the markets in which
the Company's hotels are located, as well as general business and leisure travel
trends. This seasonality can be expected to continue to cause quarterly
fluctuations in the Company's revenues, and is expected to have a greater impact
as the number of Consolidated hotels increases. Quarterly earnings may also be
adversely affected by events beyond the Company's control such as extreme
weather conditions, economic factors and other general factors affecting travel.
In addition, hotel construction is seasonal, depending upon the geographic
location of the construction projects. Construction activity in the Midwest may
be slower in the first and fourth calendar quarters due to weather conditions.
INFLATION
Management does not believe that inflation has had, or is expected to have, any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." The new standard simplifies the methods for computing
earnings per share and requires the presentation of two new amounts, basic and
diluted earnings per share. When the Company adopts SFAS No. 128, it expects to
report the following restated amounts for the three and six months ended June
30:
<TABLE>
<CAPTION>
Three months ended Six months ended
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Basic $ 0.04 $ 0.23 $ (0.04) $ 0.21
Diluted $ 0.03 $ 0.20 $ (0.05) $ 0.18
</TABLE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including but not
limited to, statements regarding the Company's hotels under construction and the
operation of AmeriHost Inn hotels are based on current expectations. These
statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the introduction
of new hotels or renovation of existing hotels in the same markets; changes in
travel patterns which could affect demand for the Company's hotels; changes in
development and operating costs, including labor, construction, land, equipment,
and capital costs; general business and economic conditions; and other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not
to place undue reliance on any such forward looking statements, which statements
are made pursuant to the Private Securities Litigation Reform Act of 1995 and,
as such, speak only as of the date made.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenue $ 14,589,238 $ 19,817,739 $ 30,658,528 $ 32,462,308
Operating costs and expenses 11,425,931 15,563,353 25,390,813 26,314,442
3,163,307 4,254,386 5,267,715 6,147,866
Corporate general and administrative (487,049) (521,994) (1,069,199) (1,006,646)
Equity in net income and losses
of affiliates 31,688 181,028 (209,413) 36,389
Earnings before minority interests 2,707,946 3,913,420 3,989,103 5,177,609
Minority interests in earnings of
consolidated subsidiaries and
partnerships, excluding minority
interest in gain on sale of property (59,659) (62,751) 145,655 141,250
Earnings before interest/rent, taxes
and depreciation/amortization $ 2,648,287 $ 3,850,669 $ 4,134,758 $ 5,318,859
</TABLE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit No.
27.0 Financial Data Schedule
(b)Reports on Form 8-K:
There were no reports on Form 8-K filed during this period
covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
Registrant
Date: August 12, 1997
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Executive Vice President, Finance
By: /s/ James B. Dale
James B. Dale
Vice President, Finance/Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,798,505
<SECURITIES> 0
<RECEIVABLES> 6,326,632
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,315,628
<PP&E> 67,830,251
<DEPRECIATION> 7,673,130
<TOTAL-ASSETS> 81,418,422
<CURRENT-LIABILITIES> 14,679,013
<BONDS> 0
0
0
<COMMON> 31,507
<OTHER-SE> 22,029,890
<TOTAL-LIABILITY-AND-EQUITY> 81,418,422
<SALES> 30,658,528
<TOTAL-REVENUES> 30,658,528
<CGS> 25,390,813
<TOTAL-COSTS> 25,390,813
<OTHER-EXPENSES> 4,375,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,687,392
<INCOME-PRETAX> (481,814)
<INCOME-TAX> (248,000)
<INCOME-CONTINUING> (233,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233,814)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
